Australian Broker Call

UBS rates BHP as Sell (5) -

As BHP Group plans to divest the Blackwater and Daunia coal mines UBS assesses the value of Blackwater at US$2.5bn and Daunia at US$800m. The broker expects net proceeds will go to reducing debt, estimating around US$1.7bn in gross sale proceeds.

The broker also flags upside risk the sale price from higher assumed long-term metallurgical coal prices but points out the recent history of coal asset transactions shows these occurred at at a discount because of ESG factors. Sell rating and $36 target maintained.

Target price is $36.00 Current Price is $45.68 Difference: minus $9.68 (current price is over target).
If BHP meets the UBS target it will return approximately minus 21% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $43.60, suggesting downside of -4.7% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates DMP as Neutral (3) -

Domino's Pizza Enterprises is scheduled to release its next trading update on November 1 and Citi analysts see potential for a positive surprise.

Neutral. $57.95 target.

Target price is $57.95 Current Price is $53.28 Difference: $4.67
If DMP meets the Citi target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $57.33, suggesting upside of 8.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates MTS as Neutral (3) -

Citi, in a quick response to Metcash's AGM update on Friday, had already highlighted independent supermarkets continue to lose market share, while growth for hardware sales is slowing.

Regarding Food and Liquor, the analysts found there is a clear calling out of value shopping by customers.

Citi remains Neutral-rated with a price target of $4.

Target price is $4.00 Current Price is $3.70 Difference: $0.3
If MTS meets the Citi target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.10, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates MTS as Hold (3) -

Ord Minnett reduces FY24 estimates for EPS by -5%. While the IGA network appears to be losing market share, the broker estimates hardware is growing broadly in line with key competitor Bunnings ((WES)).

The broker notes sales are over-indexed to tobacco and, along with the illicit trade and structural decline in smoking, this is weighing on its grocery business more than that competitors Woolworths ((WOW)) and Coles ((COL)).

In hardware sales growth has also decelerated since the beginning of FY24. The broker considers the valuation impact of weaker near-term sales immaterial and retains a Hold rating and $4 target.

Target price is $4.00 Current Price is $3.70 Difference: $0.3
If MTS meets the Ord Minnett target it will return approximately 8% (excluding dividends, fees and charges).

Current consensus price target is $4.10, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates MTS as Buy (1) -

Metcash's group sales for the first 18 weeks of the first half were up 1.7%, revealing a slowdown from the first seven weeks where growth was 2.3%.

UBS observes food sales are resilient with modest market share loss while tobacco declined and dry grocery inflation remains elevated.

Sales growth needs to improve slightly to meet UBS estimates for the first half. Buy rating and $4.50 target maintained.

Target price is $4.50 Current Price is $3.70 Difference: $0.8
If MTS meets the UBS target it will return approximately 22% (excluding dividends, fees and charges).

Current consensus price target is $4.10, suggesting upside of 10.8% (ex-dividends)

The company's fiscal year ends in April.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates PMV as Overweight (1) -

Morgan Stanley acknowledges investors have raised some questions regarding its view on the potential for demergers among the Premier Investments businesses.

In the case of Breville Group ((BRG)), where Premier Investments has a 26% stake, the broker has no insight on what the company may or may not do. The investment is considered profitable and outperformance should continue as Breville expands into a $10bn global revenue opportunity.

Morgan Stanley is also unsure whether Premier Investments would increase or reduce its stake, noting the stake was diluted in the equity raising back in 2020.

One observation the broker does make is that this is not a natural fit with the company's apparel brands although there could be tax implications from any potential sale.

Target is $32.25. Overweight rating retained. Industry view: In line.

Target price is $32.25 Current Price is $25.63 Difference: $6.62
If PMV meets the Morgan Stanley target it will return approximately 26% (excluding dividends, fees and charges).

Current consensus price target is $24.82, suggesting downside of -2.7% (ex-dividends)

The company's fiscal year ends in July.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Bell Potter rates PNR as Downgrade to Hold from Buy (3) -

Pantoro continues to ramp up the Norseman gold project. Since first pour, production has been hampered by issues that have been commonly faced throughout the Australian gold industry, Bell Potter observes, such as rising input costs and shortages of skilled labour.

While three equity raisings have been completed since, proceeds have primarily been directed towards supporting the production ramp up and strengthening the balance sheet.

The plant is now running at close to nameplate and while key metrics have improved the broker believes more is needed and clarity on costs will be key. Rating is downgraded to Hold from Buy and the target raised to $0.53 from $0.34.

Target price is $0.05 Current Price is $0.05 Difference: $0.006
If PNR meets the Bell Potter target it will return approximately 13% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates SUL as Reinstate Coverage with Equal-weight (3) -

Morgan Stanley reinstates coverage of Super Retail with an Equal-weight rating and $11.50 target. The broker remains favourably disposed to the structural changes that are being made to simplify the business down to four core brands.

The rating is based on a slowdown in top-line growth as consumer expenditure on retail goods moderates. This is balanced against the supply chain investment and category-leading brands as well as a defensive automotive exposure.

The broker envisages the risks to sales and margins are skewed to the downside for discretionary retailers but prefers Super Retail over both JB Hi-Fi ((JBH)) and Harvey Norman ((HVN)) given category exposure and network potential. Industry view is In-Line.

Target price is $11.50 Current Price is $12.30 Difference: minus $0.8 (current price is over target).
If SUL meets the Morgan Stanley target it will return approximately minus 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $12.29, suggesting upside of 1.6% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: -0.2

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Bell Potter rates SVW as Initiation of coverage with Buy (1) -

Bell Potter initiates coverage on Seven Group with a Buy rating and $33 target. The broker observes the business and investments are market leaders in their respective industries, with scale, brand and expertise underpinning the commercial advantages that are hard to replicate.

Key businesses include WesTrac, the sole authorised Caterpillar dealer in WA, NSW and ACT, Coates, the largest provider of equipment solutions in Australia and a 72% interest  in Boral, the largest integrated construction materials supplier.

Bell Potter is positive on the near-term outlook for mining, engineering construction and transitional energy markets, assessing the  company's approach to capital allocation and access to low-cost capital places it in a strong position to address opportunities.

Target price is $33.00 Current Price is $29.05 Difference: $3.95
If SVW meets the Bell Potter target it will return approximately 14% (excluding dividends, fees and charges).

Current consensus price target is $31.16, suggesting upside of 8.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY24:

Forecast for FY25:

Market Sentiment: 0.8

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates WBC as Equal-weight (3) -

Even though Westpac's updates on its cost targets have been disappointing over the past year, Morgan Stanley forecasts just 1.5% growth in ongoing expenses in FY23.

The broker expects ongoing expenses to be around $10.2bn in FY23 and assumes a further increase of 3.5% in FY24.

As a result of higher wages, third-party vendor costs and amortisation, the broker assesses there will be a requirement to step up cost savings to fund extra investment and this presents risks to forecasts.

Equal-weight rating retained. Industry view: In-line. Target price is $20.60.

Target price is $20.60 Current Price is $21.77 Difference: minus $1.17 (current price is over target).
If WBC meets the Morgan Stanley target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $22.78, suggesting upside of 4.5% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY23:

Forecast for FY24:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources